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EUR/USD recoups losses amid Fed Chair’s dovish remarks breaches 1.0800

  • EUR/USD bounces back from weekly lows, trading at 1.0818 following Jerome Powell’s comments about a potential pause in the Fed’s tightening cycle.
  • Progress in US debt ceiling talks sparks optimism, with House Speaker McCarthy suggesting a deal might be reached over the weekend.
  • In the Eurozone, the Producer Price Index rises month-on-month, while ECB officials express concern over service inflation, advocating for higher rates.

EUR/USD rebounds from its weekly lows after piercing the 100-day EMA, reclaiming the 1.0800 figure following US Federal Reserve Jerome Powell’s remarks, in which he opened the door for a pause on the Federal Reserve tightening cycle. In addition, a risk-on impulse dented an upbeat market sentiment, weighed in the US Dollar. At the time of writing, the EUR/USD is trading at 1.0818 after hitting a low of 1.0759.

Investor optimism grows as US debt ceiling discussions progress, European Central Bank eyes inflation concerns

US equities are registering solid gains. Fed Chair Jerome Powell indicated that inflation currently exceeds the target level and stresses the Fed’s unwavering commitment to guide inflation back towards the 2% target, asserting that “failure would cause greater harm.”. Furthermore, Powell noted the strength of the banking system and suggested that tighter banking credit conditions may prevent a potential rise in rates.

A sparse US economic calendar left investors reflecting on recent data. Strong Retail Sales and Industrial Production sparked demand for the greenback. This, coupled with declining unemployment claims, has prompted investors to reconsider the Federal Reserve’s (Fed) anticipated three rate cuts by the end of the year. As a result, the probability of a rate hike in June has risen from 15% to 40.4% within a week.

Regarding the US debt ceiling discussions, US House Speaker McCarthy and Senate Majority Leader Schumer are preparing to schedule votes in the upcoming days. McCarthy voiced optimism about the current discussions potentially yielding a deal by this weekend, stating, “I can see now where a deal can come together.”

On the Eurozone front, Germany’s Producer Price Index (PPI) jumped 0.3% MoM, above the prior month’s reading of -1.4%. Annually based, the PPI rose by 4.1%, decelerating sharply from March’s 6.7%. The data support European Central Bank (ECB) speakers, which have been crossing newswires.

Earlier in the day, statements from Fed officials made headlines. Fed Williams mentioned that the natural interest rate remains low despite the pandemic. Conversely, Michelle Bowman chose not to provide any comments regarding monetary policy.

On the European Central Bank front, Vice President Luis de Guindos noted that “inflation in services is the most worrying for the ECB,” warranting elevated rates. On Friday, ECB’s President Christine Lagarde added that the central bank must keep “sustainable higher” rates to combat inflation.

EUR/USD Technical Analysis

EUR/USD

Overview
Today last price1.0821
Today Daily Change0.0051
Today Daily Change %0.47
Today daily open1.077
 
Trends
Daily SMA201.0961
Daily SMA501.0891
Daily SMA1001.0807
Daily SMA2001.0464
 
Levels
Previous Daily High1.0848
Previous Daily Low1.0762
Previous Weekly High1.1054
Previous Weekly Low1.0848
Previous Monthly High1.1095
Previous Monthly Low1.0788
Daily Fibonacci 38.2%1.0795
Daily Fibonacci 61.8%1.0815
Daily Pivot Point S11.0739
Daily Pivot Point S21.0708
Daily Pivot Point S31.0654
Daily Pivot Point R11.0825
Daily Pivot Point R21.0879
Daily Pivot Point R31.091

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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